Section 26D. If a town shall have a written contract with the federal government whereby said government grants or offers such town a sum of money to be used with funds which may be provided in said town for the purposes of sections twenty-six A to twenty-six F, inclusive, and said town shall be required primarily to pay that portion of the expenses for which reimbursement is to be received from the grant, the treasurer of such town, with the approval of the mayor, or of the city manager, if any, or of the selectmen, as the case may be, in anticipation of the receipt of the proceeds of such grant, may incur debt, outside the debt limit, to an amount not exceeding the amount of the grant as shown by the agreement, and may issue notes therefor, payable in not exceeding one year from their dates. Any loan so issued for a shorter period than one year may be refunded by the issue of other notes maturing within the required period; provided, that the period from the date of issue of the original loan to the date of maturity of the refunding loan shall not be more than one year. The proceeds of the grant, so far as necessary, shall be applied to the discharge of the loan.